Rupee struggles to hold gains as dollar demand and capital outflows rise
The Indian rupee’s modest October rally stalled amid higher global bond yields, rising oil prices and growing demand for dollars from importers and investors.
The rupee’s October appreciation of 0.93% was erased as the currency closed at 94.94 per dollar, ending an eight-session winning streak. Gains earlier in the month, boosted by dollar inflows linked to the Jio Platforms IPO, were supported by RBI’s active market interventions, yet the central bank’s reserves fell to $721.02 billion. Rising global bond yields, surging crude oil prices amid West Asia tensions, and heightened dollar demand from importers hedging payables have intensified pressure.
The RBI responded with a special dollar window for Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum, tighter FX-derivative rules, and a 25-basis-point repo-rate hike to 5.5%. Nonetheless, a widening current-account deficit and strong overseas capital outflows, especially in the financial services sector, continue to challenge the rupee’s stability.
Why it matters
A weaker rupee raises import costs and can affect inflation and investment in India and other emerging markets.
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